CBO - Cobram Estate Olives

[Belli]

Could you please further clarify:

The Government revived legislation proposed by the previous Government preventing passing on franking credits where the dividend is funded by a capital raising. The consultation period has passed but it is not yet law. It doesn't necessarily prevent payment of a dividend as one OP thinks - but didn't research as per usual.

Franked distributions and capital raising | Treasury.gov.au

As part of the 2016‑17 Mid‑Year Economic and Fiscal Outlook, an integrity measure was announced to prevent the distribution of franking credits where a distribution to shareholders is funded by particular capital raising activities.

treasury.gov.au

Also be aware from the date of the October Budget franking will not apply to discounted off-market buy backs which include a dividend. The reasoning being the measure brings it in line with on-market buy backs where a company buys back the shares but not the franking. As per here:

I guess this fits under "other stuff."

Say farewell to off-market buybacks at a discount which includes juicy franked dividends. Franking will not apply as at the delivery of last night's Budget.

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[Dona Ferentes]

With 60% of the current olive crop harvested there’s going to be a significant shortfall compared to 2021, but a significantly more olives than was harvested in 2022.

“Based on the current trends and the areas and varieties harvested, it is expected that the combined production of both groves would be between 12.6 million and 13.2 million litres.

This compares to last year’s harvest of 9.5 million litres (the last ‘off-year’) and 16.1 million litres (the last ‘on-year’ in 2021).

According to Cobram, olive trees naturally bear fruit in two-year (biennial) cycles, with a lower yielding crop one year (e.g. FY2022) followed by a higher yielding crop the next (e.g. FY2023). This is a known and expected two-year cycle that Cobram says it easily manages.

So the bottom line is that the 2023 harvest will be lower than the last two years, but because there will be more than last year, that will end up a good thing for olive buyers and consumers of olive oil.

“The expected crop is 20% to 25% below our initial forecast and as previously announced this is largely driven by the unusually cold and shorter growing season delivering lower-than-average oil content in the fruit combined with smaller fruit size.,” The company explained.

It made it clear that the current harvest (which only has a couple of weeks to go) won’t see Australia run short and the 2024 crop is looking promising here, while in California where it also operates, Cobram is confident about the harvest later this year...
....
The impact of a long drought across the southern European and north African growing zones continue to pressure imports into Australia.

Cobram said “Imported olive oil products remain under increased margin pressure with European olive oil supply well down and bulk prices at 20-year highs. This has resulted in material retail price increases for imported olive oils in Australia, the USA, and Europe."
.
....

 

[frugal.rock]

How Aussie extra-virgin olive oil is bucking an international trend

The largest producer of olive oil in Australia says it is delighted by the support it is getting from Australian consumers as prices for international competitors rise.

www.abc.net.au

Nearly dividend time is it?
I think it was 15th November last year.

 

[finicky]

Yes, doesn't give an ex date in the annual report but details to be expected at the AGM.
3.3c paid some time in December.

I was unimpressed when I looked at this recently because of the low ROE but reading the preso persuades me they have good growth prospects. I read: highly productive farming techniques, a foothold in California and emphasising quality and trustworthiness which hopefully will meld into their brand - particularly as consumers recognise that Cobram doesn't adulterate with other oils - one of the reasons I always buy their product.

Not Held

 

[So_Cynical]

I've been thinking about CBO lately, low margin price taker, no pricing power but i like ag stocks.

 

[galumay]

Mmmm, I dunno So_Cynical, I think you are absolutely right - low margin price taker, horrible metrics, I really don't like ag stocks, nearly always just commodity businesses. The other thing with CBO is it's just not been listed long enough to get a real read on any potential business quality, but at this stage I see nothing to suggest it's an investible business. Its debt ridden, its still strongly FCF negative so not actually profitable. The amount of glossy pics and hype in the AR is a red flag as well!!

 

[finicky]

^^^

 

[galumay]

I feel seen.

 

[bluekelah]

Mmmm, I dunno So_Cynical, I think you are absolutely right - low margin price taker, horrible metrics, I really don't like ag stocks, nearly always just commodity businesses. The other thing with CBO is it's just not been listed long enough to get a real read on any potential business quality, but at this stage I see nothing to suggest it's an investible business. Its debt ridden, its still strongly FCF negative so not actually profitable. The amount of glossy pics and hype in the AR is a red flag as well!!

I do like to grab me some cobram EVO whenever its 50% off at woolies

 

[galumay]

I do like to grab me some cobram EVO whenever its 50% off at woolies

I do like to grab me any decent Olive Oil when its 50% off at Woolies!

 

[So_Cynical]

I do like to grab me some cobram EVO whenever its 50% off at woolies

Oddly i find myself buying their product, have done for years.

 

[divs4ever]

not a big buyer of olive oil period maybe 3 bottles in my entire life ( so far )

maybe if i used more i might see the investment potential in olive oil stocks

 

[finicky]

@divs4ever it's the edible oil of the future as more consumers come to the view that omega 6 rich seed oils are inflammatory and some credible people (on youtube!) implicate seed oils in chronic diseases.
Then, specific to Cobram, no other brand that I know of offers deep discount campaigns like Cobram and to reiterate, Cobram is on the front foot by differentiating itself from European brands because Europe manufacturers are associated with scandalous mafia substitution rackets whereby they have blended olive oils with seed oils but marketed them as pure olive oil. To be reasonably certain you do not fall prey to this the easy short cut is to buy Cobram or Red Island brands as they are explicitly not implicated with substitution.

QED

 

[Dona Ferentes]

likely to ease off on the discounting.

Olive oil price skyrockets as Spanish drought bites

Spain is the biggest olive oil producer. Two years of drought there are affecting prices worldwide.

www.bbc.com

 

[frugal.rock]

Shortfall in Europe, expecting a good run through to dividend time at least.

"Drought conditions and extreme weather in Europe have impacted olive crops, causing supply to dry up." ABC (today).

Chef Krispy Bacon shares alternatives

The price of olive oil has skyrocketed. Here's what a chef says you can use instead

With consumers paying more for extra virgin olive oil at the supermarket, chef Kirsten Bacon shares her favourite alternatives that won't break the bank.

www.abc.net.au

 

[finicky]

Well Kristy Bacon, think you entirely omitted the health aspects. Consistent with your profession.

 

[Dona Ferentes]

AGM. 3.3c divi

Outlook

"We are anticipating continued strong sales in FY2025 in both Australia and the USA, with strong demand for our extra virgin olive oil thanks to consumers continuing to recognise its high quality and positive health attributes. We will have sufficient olive oil for our FY2025 packaged goods sales plan through to the next harvests and will benefit from stabilised costs and a price increase of circa 15% on branded products in the USA. The USA harvest, which will finish around the end of this month, is expected to be similar or above the FY2024 harvest despite it being an “off-year”. The next Australian harvest is an “on-year” for CBO’s Australian groves, and as a result FY2025’s reported EBITDA is expected to be materially higher than FY2024, subject to the risks associated with agricultural production."

 

[Dona Ferentes]

3.3c divi
"We are anticipating continued strong sales in FY2025 in both Australia and the USA, with strong demand for our extra virgin olive oil ..

3.3c dividend is only once a year, and partially franked

since listing:

 

[Dona Ferentes]

has appeared on the Mirrabooka Top20 for end-Nov, probably due to price appreciation not recent buying

 

[Dona Ferentes]

sp holding around $2.00

Sales – Australia and USA
Sales in both Australia and USA are performing strongly with packaged goods sales well ahead of both budget and the prior corresponding period for the 5 months to 30 November 2024.

As we have previously announced, the Company implemented a 15% price rise in the USA across its packaged goods range in September 2024. Pleasingly, sales continue to perform strongly with growth in branded sales in both value and units seen in the period since this price rise.